Prof Pape: Trump 'UNCONDITIONAL SURRENDER' To Iran

We are joined with actually some breaking news by Professor Robert Pape, who, of course, is the author of the Escalation Trap sub stack.You can check that out.And he is a professor at the University of Chicago.Professor Pape, thank you so much for joining us again.

Thank you for having me.

Yeah.So actually, just between when we started the show and now when we're having this discussion with you, President Trump has been speaking at the G7 summit in Switzerland and is responding to this leaked memorandum of understanding that hit Bloomberg.Iranians are saying it's not real.Actually, now even President Trump is saying it's not totally real.So, first, that included a $300 billion facilitation of funds from the United States to Iran, meaning, like, investments for economic development is the phrase from the leaked MOU.Here is President Trump just moments ago talking about whether or not that particular part is real, be too.

Well, it's been reported that it includes its $300 billion investment fund.It's false.It's funded by Gulf allies.That's false.That's false.

People – you can invest if you want.I mean, what am I going to do, say nobody's ever allowed to invest?No, we're not investing.We're not putting up 10 cents.And people can decide to do that, but that's up to them.I mean, do you want me to say nobody's ever allowed to invest in a country?

I'll say it with Egypt.Nobody's allowed to invest in Egypt.Am I supposed to say that?

I'm not going to say that.

We are not investing in it, and we do not have a fund.No, I'm not.If they do it, fine.But I would say they won't be doing it for a while until they find out the behavior.It's a behavior thing.But we are not investing.

That's a false story that got picked up incorrectly from a statement that was pretty well made, I think.Maybe a little bit could have been a little more accurate.

And on top of that, the president said this again just moments ago, B3.

and you can't give Iran a nuclear weapon.And they will never have a nuclear weapon, so that's very, very strong.It's a very strong weapon.deal.Nobody knows what it is, but it's very strong.And most people seem to be very happy.

Who's really happy is the market.

Nobody knows what it is, but it's very strong.Now, Professor Pape, we can put B1 up on the screen.This is from The Escalation Trap.You wrote, And that, I think, is proving to be true even two days later, as we approach the Friday signing deadline that the vice president was telling everybody yesterday is coming up.So, walk us through a little bit of this argument from your end.Professor Pape about how Iran is in its maximum leverage period right now.

Yeah, let's let's start with the big picture.And then I want to comment directly on what President Trump said, because I think I can offer some clarity for your audience about what's going on as he's parsing his words.But let's start with the big picture.President Trump lost the bombing.Now he's at great risk for losing the deal.And what I mean by that is that Iran came out of the bombing, not just didn't collapse, but came out of the bombing with power.

It gained control of Hormuz.Now with the deal, the big risk in the deal, and I understand it's very controversial, but the risk is Iran is gaining more power through the deal.And that is very important to understand, that Iran in the deal, even by the terms President Trump describes and J .D.Vance describes, Iran will come out more powerful through the deal than it is today.So this is of enormous importance because we already understand that with the deal, and this is completely agreed to by President Trump, Iran will be able to sell oil immediately.

Well, that's a billion dollars a week.Number two, we already know, and this is completely agreed to by President Trump, President Trump, and you just heard him say it, that others can invest in Iran.That is, this idea that America would block or sanction countries for investment.This is important.We've had a tight focus on Iran, where we've put basically a ring around Iran.You can't do business in Iran or else we, America, we come punish you.

Well, that of course has deterred quite a bit of business in Iran.just by what President Trump just said, now off the table.So that means all of those Gulf countries, Qatar, it can offer that $12 billion upfront signing bonus.President Trump doesn't have to pay the money.Qatar is going to pay the money completely in line with what the Deputy Foreign Minister of Iran has said.Then you just go further and further and what you are seeing here is you are seeing just with the early stages of the MOU Iran is going to gain over this 60 days somewhere between 20 and 30 billion dollars and there's no strings on what they can do with that money.

They can give that money to Hezbollah, that is, they want Israel to pull out of Lebanon.Well, there's no quid pro quo, and Iran does not give missiles and drone technology to Hezbollah.No, this goes completely the one side.They can give that money and technology to the Houthis.They can build the arc of security resistance that we talked about on last show, no strings attached, no limits on what they can do there.That's just in the first 60 days.

Now, let's look at the true long -term problem or medium -term problem, which is the title of the substack on the escalation trap, the period of maximum leverage.This is what's happened so far, but what's going to go on in the next 60 days is yes, oil will start begin to dribble out of the Gulf, but that won't reach the drops of oil.The ships won't reach their stations, their refineries for 60 days, 30 to 60 days.And then it will be a big process after that.So what do we live on in that 60 day window?We continue to draw down the oil inventories, the oil inventories, It remains the crucial issue because there's no way around it.

And what's going to happen is as we draw down to our rock bottom levels in the global oil inventories, that means Iran's leverage is going to soar.It's going to grow.Now, in 60 days, early August, that's right when this 60 -day window ends, notice, and that's when the oil inventory bottom hits rock bottom.That means if Iran shuts this down again for any reason, doesn't like what Israel's doing, it can just come up with any reason it wants, it can hold the world hostage for even more.What's that more likely going to be in this way out the trajectory here?Because I'm thinking of this as a realist.

If you're going to maximize power for Iran, what's the next set of steps you want?You want complete withdrawal of American forces from the region.That's your next step.And you're already talking about it, and it's in the Bloomberg already.They're already laying down the marker that the next steps are going to be.And this may seem like, why do we care if US forces are there?

Because if US forces are not in the region, Now, all of a sudden, Iran has even more room for its sphere of influence.There's more reason for those Gulf countries to, when we say invest in Iran, that's also called bandwagoning and siding with Iran.That's joining Iran.Let's just be clear.Not Israel.They're not investing in Israel.

You see what I mean?So what's going to happen here?is that as this period unfolds, this is what I've been talking about, about the fork in the road that President Trump had to choose.Either he escalates or he goes down the road of surrender and allows Iran to become the fourth center of world power, where it achieves, over a period of a year or two, regional primacy.And Trump has accepted not just to get out of a deal, he's basically drawn a roadmap.Remember how President Trump said the Obama deal was a roadmap to an Iranian nuclear weapon?

Well, this is a bigger roadmap.This is a roadmap to Iranian primacy, regional hegemon in the region for as far as the eye can see, which by the way, down the road may also include nuclear weapons.That's not foreclosed here by any stretch.There's nothing here that Iran has done.So President Trump's words, he waschoosing his words very carefully in what you said.

There is nothing in the Bloomberg that he is really disagreeing with.He's saying it's all fake news, while he's in fact confirming every word that's in Bloomberg.Because what it says in Bloomberg, and if it's okay for your audience, I'm just going to read point six.The United States undertakes together with its regional partners to create a comprehensive plan agreed on by both parties, ensuring financing of at least 300 billion.Now that doesn't say America will certainly finance it.It does say America is good with it.

And for Iran becoming a regional hegemon, man, you can't ask for better than that right now.And their leverage is only growing over the next 60 days.And it will stay there through the end of the year, because it'll take that long before we'll have enough surplus to put more reserve back in our oil inventories.Because as long as we don't have the oil inventories, we don't have the cushion for for even a short period of time, and if Iran decides to temporarily block the straits, you're going to see much more panic here on the markets.

Yeah, and of course, as we and all of the rest of the world are building back up our inventories and building back up our strategic reserves, we're also buying oil for day -to -day activity, which is then putting much more demand pressure over the next kind of six months to a year as this is unfolding, which to your point, only, you know, accelerates the amount of leverage that they would have.But I wanted to push back a little bit on kind of two notions there.One, is it really surrender to say, as Trump was laying it out, and it is a very commonsense way, who am I to tell some other country whether they can invest in Egypt or whether they can invest in Iran?It's a free world.Basically, he's saying it's a free world.

If you want to invest in Iran, I happen to agree.I think sanctions are kind of insane, that the US unilaterally, and actually illegally under international law, you can't just do unilateral sanctions and say nobody's allowed to invest in Iran.So why is following Trump international law and not implementing unilateral sanctions on a country, surrender to them, and then related, curious for your take on this, right now, the Strait of Hormuz obviously has the capacity to shut down and really crimp the global economy.Over the next 20 years, we're going to have an ongoing shift to other forms of energy, and the Gulf countries are going to continue to build pipelines and other routes that take into account this choke point and tried to go around them.So global fourth power seems to me exaggerated based on the fact that the Strait of Hormuz is in some ways a deteriorating asset in that kind of a world.

Let me explain both points.First of all, I am not arguing in favor of going back to escalation.I just want to be very, very clear here.That's not my point here.I'm assessing, as an analyst, what's going on in this deal.I'm not making an advocacy, oh, we don't like X, let's go back and bomb them.

I just want to take that issue.off the table.The reason this is a complete surrender and capitulation by Trump, though just as a factual matter, is before the war, we fought a war to weaken Iran's power.We wanted to weaken it by crippling its regime.We wanted to weaken its missiles.We wanted to weaken its ability to threaten

its neighbors.This is the opposite outcome.And now Trump is signing on the dotted line.You have to recall that on February 28, he announced he wanted unconditional surrender by Iran.This is the opposite.This is unconditional surrender by the United States.

And notice Trump said, who am I to block it, dot, dot, dot, for Iran.So just as a factual matter, this just is a surrender here.And now back to the issue of Iran as the fourth center of world power.I'm not saying it's the fourth center of world power today, but what counts as a regional hegemon that would be Iran?a center of power.So number one, controlling 20 % of the world's energy.

That's a fantastic amount of control of the world's resources.The United States only has 16%, Russia only 11%.To put this in, then on top of that, they're building a sphere of influence.So now when we talk about a regional hegemon, what's the next step?Then that first step is resources.Second step is regional influence.

Well, now what they're doing is they are kicking Israel out of Lebanon.They're extending their umbrella over their key allies, and they're building that security belt from Lebanon to the Red Sea to the Gulf.The third is the states in the region bandwagon with you.They give you things rather than contain you.So those are all steps already happening.And what I'm explaining is this is what it means to be a center of world power, and it's already emerging, and it will take more time.

consolidate, but they're on a road to do that.That's my point, not that they're there now, and this is the world we're going to have to live with.This is a world of the future that's coming.And that's my job as an analyst.It's not to make it all sound all fine.Let's just all pat.

Everybody's fine.Okay, let's accept reality.My job is to tell you what's coming so you can prepare for that reality.So why, for example, might Israel freak out and start assassinating leaders in Iran as a result of this?I'm not telling you they're going to assassinate the leaders coming on Friday, but notice they've done that before.Okay, it's not on this time just literally a year ago when Israel started the 12 -day war by literally Killing the exact diplomats on the weekend.

We were about to meet with them Now, I'm not telling you that's going to happen, but things like that you should expect here because Israel was the rising power.Now, it is the opposite.So why might Israel lash out?Well, if you don't have the assessment of the world we're moving into, you can't really get a good judge on the risks.

And there's also an element of the sunk cost fallacy at play, too, in that, you know, the What often will create escalation into a hot war that lasts longer and longer is the idea that you see a leader, like the president of the United States, whether it's Donald Trump or somebody else, saying, well, I have to escalate, because otherwise it looks like complete and total capitulation.It looks like surrender, to borrow the word that you just used, Professor, based on what we've seen from the leaked MOUs.I think CNN has its hands on one now, as well.So, what's interesting is, if we take the administration at face value here—I'm curious for your take on this.What—one of the things that maybe we aren't anticipating is that Trump is willing to take a major loss.and, like, be viewed as somebody who has capitulated, which is odd, because the very cheerleaders he's been, you know, drawing nearer to, the Mark Levins of the world, over the course of the war, are the ones that are devastated right now, furious, devastated, enraged right now by the terms of the deal.

And so, if we, again, are taking the ad minutes at face value and say, you know, 60 days from now, everything has gone according to plan, It looks like maybe they didn't escalate because they just became comfortable taking a big loss.Is there some element of that, too?

So there is definitely, truth to exactly what you said, in the snapshot of today.So there is no doubt that President Trump is taking the loss.He's trying to shift the buck to J .D.Vance.So he's making J .

D.Vance carry as much of the loss as possible.So that's why Vance has been on like 32 news stations in the last 12 hours.And defending Iran as the rational, reasonable people and so forth.So that's the case.But my point is a little bit broader than just the snapshot of today.

We're moving into an incredibly contentious 60 -day window.We're moving into a window where literally war, a hot war, could break out at any point in this 60 days.Now, how you would know that won't happen for the United States is that American forces will withdraw So, if American forces leave the region, that is all those, the carriers leave, all those aircraft leave, the 10 ,000 ground forces leave.If we pull out, if we don't repopulate the bases that have been destroyed, remember, a lot of bases have been destroyed.Well, if that happens, then the risk of escalation will truly go down.But in that window of that 60 days and beyond,

that is where you have more losses coming for President Trump.And as he gets into the midterms here, the question is going to be, can he keep eating losses?Because Iran's not done giving them losses yet.Iran's not saying, oh yeah, I got what I wanted.I'm good now.We're just good for the next five years.

No, that's not what Iran is doing here.They already are putting down the markers.They want American forces out of the region.Israel to truly be out of Lebanon.of a killed over a dozen of our troops, $100 billion, and now we come out with a loss?Is that going to help in the midterms?

This is the other side of the trap, if you see what I mean.I'm not telling you he will certainly escalate.That's not where I'm at.I'm not advocating he escalate.I'm assessing that we're in the middle game of the escalation trap.And how you would know you're in the end game is not just by a piece of paper and promises of the future.

American forces will physically withdraw from the region.That, if you go back to my ex account, that's what I was warned about.about in early February.We're building an armada.I wasn't focusing on Trump's words.I said, we're likely going to bomb Iran.

That's why I started the escalation trap, because we moved the troops here.Well, if we unmoved the troops, now you're following the indicators that Professor Pape uses, which is the behavioral indicators.That's how you'll know you're actually out of the trap.

And I think the way that a lot of people understand the escalation trap is that it's fairly determinative and that each step pushes you further into it.But at some point, presumably, this is going to end.So how does the model account for other decision making that gets out of the escalation?Let's say this MOU does stick.Does that mean the model was flawed and needs to be amended?Or are there elements within the model that allow for this?

almost every two weeks.I've got the graphics and so forth.I'm glad to send you the graphics, by the way.This is where we are.We are at a fork in the road, and Trump is choosing the acquiescence track.How you'll know then that the escalation model is ending is when Trump withdraws the forces.

That's how you know that you're actually, it's the end.And that just hasn't happened yet.Now maybe he'll withdraw forces next week.Maybe he'll withdraw forces in 30 days.I don't know, but I'm not predicting the timing.I'm predicting the trajectory and the stages.

I'm sorry, but this is the 20 years of the Mahomet.This is the only way out of this is either you go forward with more escalation or you withdraw your forces and you accept this acquiescence, accommodation, capitulation to a stronger Iran.graceful way out where we just pretend this didn't happen and suddenly we're back to February 27.We're not.The status quo of February 27 is not coming back.There's two status quos in front of us.

More war or Iran is a stronger power for many years to come.

Professor Pape, thank you so much for reacting to breaking news this morning.We really, really appreciate you being here.

Well, and thank you for having me and for allowing me to explain what's essentially a model and all these stages here, which is really quite something.So thank you so much for doing that.

No, thank you.I know our audience appreciates it.It appreciates it a lot.So we're very grateful to you for making it.

And if you want that graphic, just let me know and then you can circulate it with people.shoot me a note.Sounds great.

Thank you so much, Professor Pape.

Okay.All right.Thanks again.Bye -bye.